Case Study Financial & Management Accounting: Financial and trend analysis and industry comparisons - Essay Example

This reveals that the company has been able to increase its profit during the financial gloom, which is a positive sign for investors. However, in the balance sheet it can be seen that the cash balance has reduced to $30,000 in 2012 from $40,000 in 2011. The current assets are more in comparison to current liabilities, which proves that the company has enough working capital to manage its operational functions. The number of shares in 2012 has increased to 38,000, which indicates a further issue of 8000 shares, as there were 30,000 shares in the previous years.

The earnings per share have also from $2.94 in 2010, $3.06 in 3011, to $3.15 in 2012. The liquidity ratios reveal that the liquidity position of the company has deteriorated from 2010 to 2012, which is not a good indication, and indicates towards insolvency in future if this trend continues (Wolk, and Tearney 10-15). The leverage ratio of the company also shows an increasing trend, which means that risks associated with investment are high. The profitability ratios reveal that there has not been any drastic improvement in profitability over the years, and the return on equity has decreased from 14.

20 percent in 2011 to 13.98 percent. The problem is that CEO Bob Scott is focusing too much on an increase in sales of 25 percent. However, there are other important aspects which need to be considered for profitability, such as liabilities, debts, assets of the company, expenses, etc, which he is hiding behind the sales figure (Weil, Schipper and Francis 103-107). Answer 2 Ratio analysis is a significant financial measurement tool. Each ratio has its own significance and indicates certain aspect of a company.

In this case study the significant ratios are mentioned, yet there are certain ratios which has been missed out, would have given the investor a clearly look of the financial status of the company. The first ratio that can be considered is Return on Investment ratio. The return on investment ratio would assist in understanding the investments made by the company for business, and return achieved from business functions. The Debt to Equity ratio should have been also considered, so that the constituent of the capital structure can be understood.

Working capital turnover ratio would have been appropriate for TEC, so as to understand the status of the working capital of the company. The Price Earnings ratio would have been helpful in identifying the earning per share in comparison to the price of each share. Apart from this there are other ratios like operating ratio, stock turnover ratio, etc, which if included would have presented a transparent picture of the company (Elmaleh 105-106). Answer 3 CEO and president of the company Bob Scott said in the beginning of his speech that the fiscal year 2012 has been a mixture of opportunities and threats for TEC.

He mentioned the positive results but did not reveal any negative aspect about the company which could define the threats. He also indicated that sales of the company have increased by 25 percent. In comparison to the industry growth, which is around 10 to 12 percent, this revenue growth of the company was enormous. He mentioned that the company would be able to pull away from the prevailing threats due to increased revenue, but what were the threats or risks that the company faced and how are they going to face it was not explained by him.

He did not mention anything about company’